Growing health care costs should be monitored to ensure efficiencies

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Despite the dollars being poured into the system, the driving question for many observers is whether that money delivers value. Answers are not that easy to come by since defining the right value measurements is a matter of constant discussion. And as the debates carry on, healthcare continues to consume an ever larger piece of provincial budgets.

In a perfect world of universal health care, a dollar spent would be a dollar put to good use. Yet rankings of Canada’s health care performance paint a less-than-ideal picture.

Aging populations and the prospect of lower tax revenues, years of escalating costs that far exceed GDP growth, and outdated funding and management models are putting greater pressure on the sector as a whole.

It’s not for lack of funds. When it comes to per capita spending, Canada is second only to the U.S.; and sixth in OECD rankings.

In a recent Conference Board of Canada report, Canada ranked lowest (10th) among 17 countries in the “B” category. (The only A rankings were awarded to Japan, Switzerland and Italy.)

Health care can account for up to 45% to 50% of an entire provincial government’s expenditures

The Commonwealth Fund places Canada sixth among seven OECD countries, with the U.S. occupying last spot. “Our per capita spending for universal healthcare is not doing very well,” says Mark Stabile, director of the School of Public Policy at the University of Toronto’s Rotman School of Management.

The last decade has been particularly demanding on the sector, he adds. While it had gone through a period of severe cutbacks during the Chretien government, “The last decade, the provinces spent it all back. So we ended up where we would have any way.”

Despite the dollars being poured into the system, the driving question for many observers is whether that money delivers value. Answers are not that easy to come by since defining the right value measurements is a matter of constant discussion. And as the debates carry on, healthcare continues to consume an ever larger piece of provincial budgets.

Depending on the jurisdiction, health care can account for up to 45% to 50% of an entire provincial government’s expenditures and growing. “As such, it is crowding out other spending priorities, including tourism and education, which are stagnant or decreasing,” says Jason Sutherland, assistant professor at UBC’s Centre for Health Services and Policy Research in Vancouver.

An added burden is the fact that the whole system is structured around impossible measures of productivity that have been in place for 50 years, contends Louis Theriault, director of research for the Canadian Alliance for Sustainable Healthcare at the Conference Board of Canada. “It is designed for a type of medicine that doesn’t exist today. There have been monumental changes in chronic disease management, communications and diagnostic tools that are transforming the way healthcare is being delivered. Productivity needs to be measured and paid for based on outcomes rather than input.”

As it stands today, the system is grappling with issues relating to physical infrastructure, service-delivery models, provider incentives, labour contracts and information flow, among others. Since the 1960s, much of the available care that once took place only in hospital can now be delivered in the community or at home, yet the current system is ill-equipped to support newer healthcare delivery methods.

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When the question of productivity is brought to the discussion, one of the biggest challenges is establishing a sense of priorities, Mr. Theriault says. “We’ve had 7% annual growth in healthcare costs over the last 20 years so the gap is building pretty quickly. Some of that is tied to factors we cannot change, such as an [increasingly] aging population generating less tax revenue, and population growth. Those two account for 2.2% growth that healthcare can’t do anything about.”

Even if the system could pay for everything and sustain it, the question remains, are we still getting value for our money? “There needs to be more thinking around how the system should be modified to maximize health value for every dollar spent. Right now the solution is more money and more money. But poor service doesn’t buy you outcomes,” Mr. Theriault says.

There are a number of opportunities to improve efficiencies without having to spend much more, Mr. Sutherland believes. “Some corners of the healthcare system are incredibly ill managed. For example, 12% of hospital beds are filled with patients already discharged but have no place to go home to. That’s one of the largest factors contributing to hospital inefficiencies.”

Payment models are another area of opportunity. Ontario and B.C., for example, are switching from global budgets in which ministries “pay and hope for the best” to payment systems based on specific services provided, Mr. Stabile says. “That’s something we need to strive for because it will drive productivity and efficiency gains. It’s not necessarily a cost reduction. Rather, targeted budgeting is focused on doing more with what you have. A lot of Europeans have moved that way.”

Canada could also spend more time assessing the economic efficiency of new procedures and drugs, he notes. “We need to be more rigorous. New innovation is great, but let’s make sure we focus on the ones that reduce costs and improve outcomes. With proper evaluations, we can determine if it will either deliver better results at the same at the same cost, or the same result at a lower cost.”

New innovation is great, but let’s make sure we focus on the ones that reduce costs and improve outcomes

Given the economic climate, the system appears to reach a tipping point that is prompting stakeholders to seriously rethink business models and generate productivity measures that make sense. In some cases, that could mean turning to international best practices, although one needs to understand the nuances involved since the UK, Scandinavia and the U.S., for example, have different funding mechanisms, regional structures and social contracts.

“There are good lessons to be learned,” Mr. Theriault says. “But they need to be contextualized. But at least you can get the conversation going.”

Expanding the scope beyond acute care will also play a critical role in creating a more productive system. According to the Conference Board report, a dollar invested in improving economic and social factors affecting population health has more impact than an additional dollar invested in a healthcare system that is mainly focused on the acute care aspect.

Perhaps the biggest element that is missing in the discussions is the voice of business Mr. Theriault argues. “Business has a lot to gain by having a healthy workforce. After all, labour is a key input in the production process. Not one document published in the last 15 years talks about that. But they need to play a role in facilitating the process.”

While it’s sometimes difficult to draw a straight line between quality and productivity, the fallout from inefficiencies can extend beyond the circle of care, Mr. Sutherland confirms. “The toll on employers and families is high. What are the [additional] costs that are not borne by the healthcare system?”

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